Obama’s Tax Hike Trojan Horse
by William O'Keefe
October 19, 2011
When President Obama recently addressed Congress on his latest jobs proposal, he seemed to be setting the stage for a Truman like campaign against a “do nothing” legislature.
That suspicion grew as he went around the country to drum up support for his new stimulus plan. And then last Monday he removed all doubt by sending a jobs bill to Congress that is unlikely to be passed (and shouldn’t be in its present form).
Many analysts believe some of the provisions—the tax breaks for small businesses and families, the extension of the payroll tax reduction, the expensing of new plant and farm equipment, and the bridge to work— could have a positive economic effect. Their temporary nature and high cost, however, limits the potential efficacy.
Still, it’s the tax hikes the president included as “pay-fors” that really make his bill DOA.
Measures to limit tax deductions for “millionaires and billionaires” (aka taxpayers making over $200,000) doesn’t only increase taxes on those who are not wealthy, it also taxes many small businesses that file as individuals. Remember Joe the Plumber?
Repealing the accelerated depreciation rule for private jets—a provision of the tax code enacted to stimulate job creation among domestic aircraft manufacturers—would directly hit employment in our domestic aviation industry.
Singling out a politically vilified industry for tax hikes while funneling an increasing amount of tax dollars to favored firms doesn’t even meet the president’s own standard of “a tax code where everyone gets a fair shake.” In fact, of the 14 proposed tax hikes included in Obama’s stimulus bill (summarized here by Americans for Tax Reform), 10 target oil and gas firms.
In a recent evaluation of federal subsidies for energy producers, the U.S. Energy Information Administration (EIA) found that federal energy subsidies grew by more than $19 billion from 2007 to 2010—from $17.9 to $37.1 billion.
Accounting for $9 billion of that total jump, renewable energy enjoyed the biggest increase. Subsidies for these fuels (wind, solar, biofuels, etc.) now total $14.7 billion. And that figure includes the now infamous loan guarantee program responsible for the Solyndra bankruptcy scandal.
Rent-seeking and corruption aside, a 2008 EIA report demonstrated that, while all energy sources averaged $1.65 subsidy per megawatt hour (Mwh), wind and solar received nearly 15 times that—about $24 per Mwh.
Obama’s stimulus plan would further exacerbate this disparity. It would penalize our oil and gas industry —which has been creating jobs—while lining the pockets of an industry that’s sending an increasing number of jobs overseas
The only conclusion that can be drawn from the president’s legislative gimmick is that he is using the 25 million unemployed and underemployed Americans as a campaign weapon against Republicans. Such a strategy is both callous and shameful.
If Obama was serious about getting people back to work, he would take steps to create a healthy nonpunitive investment and regulatory climate. He would propose a major overhaul of a tax system that only works for special interests.
He would also take discretionary, non-defense spending back to the 2008 level. If he acted to restore confidence in the economy and the government, he would witness both an increased willingness of consumers to spend and a jump in investments, a pre-requisite for job-creation.
Mr. President, your Simpson-Bowles deficit commission gave you a set of proposals that would have reduced the deficit and encouraged investment and confidence. Instead, you gave it the back of your hand and the alternative you offer now is a tax hike Trojan Horse.